China suppliers of solar panels and power systems are optimistic about strong sales as they improve product performance, even while slashing prices and confronting substantial industry challenges.

This is according to Global Sources (NASDAQ: GSOL) China Sourcing Report: Solar Panels & Power Systems . The Report covers the major types of China-made solar panels and power systems, including crystalline and thin-film modules and fixed and portable versions.

Publisher of the Report, Livia Yip, said, "Buoyed by stellar sales performance in 2010, when some product categories soared by 200 percent, most China suppliers are confident of continued export growth in the coming months. Of surveyed suppliers, nearly 80 percent anticipate double-digit increases for overseas sales.

"To secure market presence and attract more orders, suppliers are launching innovative designs and cutting prices by as much as 15 percent. Such steps aim to ensure survival as the industry engages difficult changes."

China Sourcing Report: Solar Panels & Power Systems shows rich R&D yielding innovative products, with greater portability being a major trend among manufacturers. New designs include power systems for smartphones, notebooks and MP3 players. Releases of PV sets for emergencies and outdoor activities are smaller in size, and convenience is also seen in designs featuring foldable solar arrays.

Among solar panels, R&D is also targeted at enhanced efficiency with conversion rates of 16 percent and higher, service life extension to 25 years, and a wider operating temperature range of -40 to 85 °C. The latest products from China are also more appealing, with attractive white or black frames.

China suppliers cope by cutting prices, expanding markets

The Report also reveals that China-made solar panels and power systems are becoming less expensive as competition intensifies. Forty-two percent of surveyed manufacturers are planning to pull down quotes. Price cuts stem from recent developments, including the entry of more small and mid-size companies attracted by a steady rise in demand for alternative energy technologies. The 40 percent drop in polysilicon costs since March 2011 is another contributing factor.

While the EU remains the top export market absorbing 80% of shipments, many China suppliers are expanding their reach into non-EU countries, North America, the Asia-Pacific region and Africa to boost sales. The domestic market is gaining more attention as well.

These strategies come as the industry faces new challenges. Besides escalating price competition, suppliers are dealing with Germanys and Italys announced reductions of feed-in tariffs on large PV installations. Suppliers worry this might discourage investment in solar-generating systems across the EU, diminishing demand for panel technologies there, leading to a consolidation of the industry in China.

To survive such difficulties, some enterprises are moving upstream for greater control of manufacturing expenditure and quality.

Other industry trends indicated by China Sourcing Report: Solar Panels & Power Systems include:

-74% of manufacturers plan to increase capital expenditure

-53% of suppliers see pricing pressure as the biggest challenge

-Higher labor and material costs and stricter overseas standards are also concerns